What's the cost of free community college?

For students struggling with tuition and colleges struggling with declining enrollment, President Barack Obama's plan for free community college sounds like the answer to many problems.

Obama made headlines nationwide when he proposed free community college education for as many as 9 million Americans, saying he wanted two years of college to become as free and universal as high school is today. Ohio has 23 community and technical colleges that together educate more than 300,000 students; the average annual cost per student is $4,000, but many receive grants, loans and other aid.

"When we interact with prospective students who want to come to the college, without a doubt, finances are the No. 1 barrier to people entering the community college system," Central Ohio Technical College President Bonnie Coe said.

Obama, in his sixth State of the Union speech, sought to address that barrier: "I am sending this Congress a bold new plan to lower the cost of community college — to zero."

But Republicans are quick to point out: there's no such thing as a free lunch, or a free college education. The estimated $60 billion in federal dollars it would cost to fund that program — not to mention the $20 billion states would chip in — over 10 years need to come from somewhere.

"Free college sounds great. Free stuff always sounds great. The question is, how you are going to pay for it, and who is going to pay for it?" said Rep. Steve Stivers, R-Columbus.

Here's how Obama suggested paying for it:

• Raise the top rate for taxing long-term capital gains — money made on stocks, bonds or real estate held for more than a year — to 28 percent. Currently, the top rate is 23.8 percent for individuals with more than $406,750 in taxable income, which includes a 3.8 percent tax on investments for individuals who make more than $200,000.

The tax rate for long-term capital gains is lower than the maximum income tax rate, which was 39.6 percent in 2014.

• Close the loophole that allows people to pass capital gains to their heirs without taxes. For example, if you purchase a stock for $100 a share and that grows to $500 a share over your lifetime, you can pass the entire amount to your heirs without paying taxes on the $400 in capital gains.

Capital gains up to $200,000 per couple or $100,000 per individual would be passed on free of tax, the president proposed.

• Impose a fee on liabilities of about 100 firms in the nation with assets over $50 billion to discourage excessive borrowing.

Obama initially proposed eliminating tax cuts for 529 education savings plans, a college savings plan that generally is not subject to federal or state taxes. Only about 3 percent of Americans use the plan, and those people tend to be wealthier, according to a 2012 Government Accountability Office report.

However, that proposal was met with ire.

Fewer people would take advantage of 529 plans if they were taxed, eliminating one important incentive to send students to college, said U.S. Rep. Bob Latta, a Republican. Taxes, like the one proposed, send more money to Washington and leave less at home in Americans' pockets, he said.

"If (Obama) was serious about increasing access to higher education, he wouldn't have proposed taxing college savings plans, also known as 529 plans. This proposed tax is a direct blow to middle class families who are already sacrificing to save for college," U.S. Rep. Pat Tiberi said in a statement.

On Tuesday, the Obama administration scrapped the plan to raise taxes on college savings accounts, according to a USA Today report.

Focus on community college

For Ohio's community colleges, any attention the president's proposal can bring to the two-year programs is good news, said Jeff Ortega, spokesman for the Ohio Association of Community Colleges.

"National leaders are talking about affordable college education. State leaders as well. They recognize the answer to affordability lies in community colleges," Ortega said.

Terra State Community College President Jerome Webster said the president's proposal brought important attention to community colleges. It also emphasizes the importance of colleges helping students to complete post-secondary education.

That's also important because enrollment at community colleges has taken a hit as the economy has improved. Enrollment has dropped 18.5 percent in the past five years — more than 38,000 students — and 5.4 percent between fall 2013 and fall 2014 alone, according to the Ohio Board of Regents' preliminary enrollment estimates.

Several Ohio colleges have offset these losses by laying off staff or leaving positions vacant. Obama's proposal could offset some of those enrollment and financial losses, community college officials said.

Students don't return to college when financial aid runs out, usually over the summer, Zane State College President Paul Brown said. If Obama's proposal gives students an assurance the money will be there, that would have a major affect on enticing people to come to college, he said.

That might become a problem for four-year institutions if students know they can obtain two years of free classes elsewhere.

"When a young person is making a decision about where they are going to go to college, if everybody knew that the first two years of college could be free then at least they are going to consider that," said Coe, with Central Ohio Technical College.

Ohio might be uniquely qualified to tackle the proposal's emphasis on completion. Recent reforms transformed community colleges' state funding formula from one based on enrollment numbers to one based on how many students complete courses, certificates and degrees, Brown said.

"No state has embraced that particular issue better than Ohio," Brown said.

Political reality: probably not

While there's plenty of excitement, Ohio community college leaders also are aware the proposal has a long way to go.

"While we are excited about the idea presented in the announcement of the president's plan, it is premature to have any idea what might happen during implementation, as well as what it could mean to our students," said Keith Stoner, spokesman for North Central State College in Mansfield.

Coe, with Central Ohio Technical College, received inquiries from businesses and individuals questioning whether they should hold back on enrolling until the programs are free.

"I considered that to be an unintended consequence. We don't need anybody holding back," Coe said.

The proposal needs to be introduced to Congress and passed — no easy feat — then approved by state lawmakers because Ohio would foot one-fourth of the bill.

"The reality, I believe, hinges on whether Congress can get bipartisan support. There are some tough challenges ahead for the Congress in that respect," Brown said.

Reporter Daniel Carson contributed to this article.

jbalmert@gannett.com

740-328-8548

Twitter: @jbalmert

What are they saying?

Sen. Sherrod Brown, Democrat

"Whether it's a foundation toward completing a bachelor's degree or job training to enter the workforce, community colleges help make people's dreams a reality. But student loan debt can create an unnecessary burden that follows people for years."

Rep. Bob Gibbs,

Republican

"There is nothing free about this plan because the president plans to fund this proposal by taxing college savings funds. ... Both sides of the aisle agree education is a priority, but where we disagree is the level of government involvement."

Rep. Jim Jordan,

Republican

"As happens too often, the president offered an unwieldy, cost-prohibitive solution to a problem facing many Ohio families. The entire cost burden of this proposal would be carried by hard working taxpayers through their state and federal taxes. We need to help reduce the cost of college by increasing competition in higher education."

Rep. Brad Wenstrup, Republican

"Community colleges are a valuable part of our educational system, and provide an important option for many students and families. However, $60 billion is not free, and ending benefits to middle class 529 college savings plans to pay for it is counterproductive and an added tax on millions of families."

Rep. Pat Tiberi,

Republican

"Free education sounds great, but just like in previous State of the Union speeches when he talks about universal preschool, President Obama shows he's for creating more ballooning entitlement programs rather than improving and making sustainable the ones we already have."

Rep. Bob Latta,

Republican

"As of now, we don't see where money is going to come from. A lot of states are just recovering and don't have the funding for this."